Myths of Japanese employees and pay

In the previous section about the myths of Japanese business profits and the Japanese market, we looked at some of the myths a foreign company’s executives might hear from its Japanese subsidiary President or sales manager. Now let’s look at some of the myths the subsidiary employees might point to when negotiating pay and benefits.

Myth: A bilingual Japanese subsidiary President expects to earn at least $200,000 a year, regardless of performance and even if there are only 2 or 3 employees at the subsidiary. Fact: This was a myth when I first wrote about it over a decade ago in 2004; it’s still a myth, but less so as Japan’s bilingual workforce shrinks. Bilingual Japanese executives, especially those in Tokyo with English language skill of TOEIC 900 and above, are becoming more expensive in the run-up to the 2020 Tokyo Olympics, but $200,000 a year is still a dream for most. As a rule of thumb, expect to pay around JPY800,000 a month, plus performance-related bonuses to take total pay up to around JPY12,000,000 a year, for a reasonable bilingual Japanese executive managing a long-term 4 – 6 person office. For an office of 10 or more long-term, it’s likely a good bilingual Japanese executive will demand JPY1,000,000 – JPY1,500,000 a month plus performance-related bonus to take total pay up to JPY20,000,000 – JPY24,000,000.

Myth: It costs $100,000 a year to hire a competent bilingual secretary or executive assistant. Fact: Two decades ago this myth was fact and many bilingual executive assistants of questionable skill earned incredible salaries. Nowadays its just a myth; it’s possible to hire a very capable bilingual executive assistant for JPY300,000 – JPY400,000 a month.

Myth: Bilingual employees should earn at least 50% – 100% more than non-bilingual Japanese staff. Fact: Despite the declining number of bilingual Japanese in the workforce and increased demand ahead of the 2020 Tokyo Olympics, bilingual Japanese earn only about 20% – 30% more than non-bilingual Japanese for a similar responsibility but in a foreign company’s Japanese subsidiary. The number of young Japanese attending university overseas has declined sharply in the past decade, but many returnees still prefer to work for a foreign company’s Japanese subsidiary, even for a similar salary to that which they would earn at a domestic Japanese company, because they like the more flexible work environment.

Myth: Japanese won’t work for performance-related pay; they expect a guaranteed salary with guaranteed summer and winter bonuses. Fact: Since starting business in Japan in 1993, I have never paid a guaranteed bonus to a Japanese, or other nationality, employee and have not lost an employee because of it. Many Japanese do expect summer and winter bonuses, but most of those that do are probably temperamentally unsuited to working for a small Japanese subsidiary of a foreign company. The kind of employee suited to the flexible needs of a small company, and who is confident of his or her ability, will want the upside earning ability of a fairly structure performance-related pay package.

Myth: Japanese employees expect a job for life and it’s very expensive in severance pay and legal fees to dismiss a Japanese employee, even with cause. Fact: Despite the increase in the number of workers under 35 years-old changing employers mid-career, many Japanese still prefer lifetime employment if they can find it. There is no such thing as lifetime employment written in either of the Japanese laws, the Labor Standards Act and the Employment Contracts Act, that govern most things about employing workers in Japan. Lifetime employment arose because during Japan’s post World War II rebuilding period, it was beneficial for employers and employees alike to forge lifetime employment ties. Japan also decided that lifetime employment was in society’s best interests and, while no Japanese law states that any employee has the right to lifetime employment, the two laws noted above include provisions indirectly supporting it. Article 20(1) of the Labour Standards Act allows an employer to dismiss an employee, with or without cause, simply by giving the employee 30-days written notice, or 30-days pay in lieu of notice. If a company fires an employee for an obvious cause, such as repeated drunkenness or abusive behavior, the employee has small chance of redress, but Article 16 of the Employment Contracts Act states that any dismissal not in society’s best interests (from a Court’s perspective) is ineffective. Except for obvious causes, which an employment contract or workplace rules must list, judges generally rule in the employee’s favor and reinstate him or her with full pay backdated to the date of the ineffective dismissal. Add in Japanese attorney fees at JPY35,000 – JPY65,000 an hour, and litigating a labor dispute can indeed cost a lot. The laws noted above do not govern firing directors. In such cases, a company needs to prove clear cause because if not, the company must pay the director until the natural end of his or her director’s term. This is why contracting a nominee director makes good commercial sense, or if using an employee as director, minimizing director terms. Fortunately, most Japanese dislike litigation unless deliberately abused and provoked. If a foreign company is sensitive and fair, it will have far less labor problems. I have dismissed several Japanese employees in the past two decades and have not had problems after dismissal.

Myth: All Japanese speak, read, and write English because they had to learn it at school. Fact: Just as most English people over 20 (including me!) have forgotten the five years of French studied in high-school, so it is with many Japanese. Consider the following:

Despite all Japanese learning English during high-school, less than 12% of Japanese can communicate in English, where ‘communicate’ means the entire spectrum from daily minimum conversation through to near-native. This generally agrees with Japan’s lackluster ranking, recently 40th out of 48, among countries where English is a second language.

It’s difficult to estimate the number of people who score TOEIC 900 and above, because TOEIC doesn’t publish exact figures, but the best estimate is less than 1.5% of all Japanese who take the TOEIC test.